Washington Should Be Obsessing About Jobs and Wages Instead Of Deficit Cutting

Robert
Reich is one of the nation’s leading experts on work
and the economy, is Chancellor’s Professor of Public
Policy at the Goldman School of Public Policy at the
University of California at Berkeley. He has served in
three national administrations, most recently as
secretary of labor under President Bill Clinton.

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It was the centerpiece of the President’s reelection campaign.
Every time Republicans complained about trillion-dollar
deficits, he and other Democrats would talk jobs.

That’s what Americans care about — jobs with good wages.

And that’s part of why Obama and the Democrats were victorious on
Election Day.

It seems forever ago, but it’s worth recalling that President
Obama won reelection by more than 4 million votes, a million more
than George W. Bush when he was reelected — and an electoral
college majority of 332 to Romney’s 206, again larger than Bush’s
electoral majority over Kerry in 2004 (286 to
251).The Democratic caucus in the Senate now has 55 members
(up from 53 before Election Day), and Republicans have 8 fewer
seats in the House than before.

So why, exactly, is Washington back to obsessing about budget
deficits? Why is almost all the news coming out of our nation’s
capital about whether the Democrats or Republicans have the best
plan to reduce the budget deficit? Why are we back to showdowns
over the deficit?

It makes no sense economically. Cutting the budget deficit —
either by reducing public spending or raising taxes on the middle
class, or both — will slow the economy and increase unemployment.
That’s why the so-called “fiscal cliff” is so dangerous.

In the foreseeable future our government has to spend more rather
than less. Businesses won’t hire because they still don’t have
enough consumers to justify additional hires. So to
get jobs back at the rate and scale needed, government has to be
the spender of last resort.

The job situation is still horrendous. Twenty-three million
Americans can’t find full-time work. Less than 59
percent of the working-age population of the nation is
employed, almost the lowest percent in three
decades. 4.8
million Americans have been out of work for more than
six months. The 40-week average spell of joblessness is
almost three times the post-1948 average.

And even those who have jobs are finding it harder to make ends
meet. Jobs created since the trough of the recession pay less
than jobs that were lost. The median wage is 8 percent below what
it was in 2000, adjusted for inflation. And wages are still
heading downward: Average hourly earnings in October were 3.1 percent below
what they were in October, 2010.

This isn’t just an ongoing tragedy for 23 million Americans and
their families. It also robs all of us of what these people would
produce if they were fully employed – roughly $2 trillion worth
of goods and services that won’t be created this year.

These folks would also be paying taxes — and they’d require less
unemployment insurance, fewer food stamps, and less public
assistance than they do now. According to estimates
byBloomberg News, the total cost of
those lost tax revenues and the extra social spending is more
than twice what taxpayers will shell out this year to pay
interest on the federal debt.

In other words, unemployment is hugely expensive. Debt, by
contrast, is relatively cheap. The yield on the 10-year Treasury
is only about 1.7 percent. Creditors worldwide are willing to
lend America money that won’t be repaid for a decade at the
lowest rate in living memory.

So why are we debating how to cut the deficit when we should be
debating how best to use the cheap money we can borrow from the
rest of the world to put more Americans to work?

Because too many Democrats inside and outside the Beltway have
ingested the deficit cool-aide that the “serious people” on Wall
Street have serving for two decades.

And the President has been all too willing to legitimize their
deficit obsession by freezing federal salaries, appointing a
deficit commission, and, now that the election is over, going
back to deficit-speak.

A month after the election Obama was on Bloomberg Television
saying business leaders need “a deal on long-term deficit
reduction” before they’ll increase hiring.

That’s just not true. Before they’ll increase hiring they need
customers.